Stocks Close Mixed But Dow Reaches New Record Closing High – U.S. Commentary

Stocks fluctuated over the course of the trading session on Tuesday before eventually ending the session mixed. Despite the choppy trading on the day, the Dow reached a new record closing high.

The major averages ended the day on opposite sides of the unchanged line. While the Dow climbed 122.73 points or 0.5 percent to 26,773.94, the Nasdaq fell 37.76 points or 0.5 percent to 7,999.55 and the S&P 500 edged down 1.16 points or less than a tenth of a percent to 2,923.43.

The lackluster performance on Wall Street came as traders seemed reluctant to make significant moves amid a quiet day on the U.S. economic front.

Lingering uncertainty about trade also kept some traders on the sidelines even after President Donald Trump announced a new trade deal between the U.S., Mexico, and Canada to replace the North American Free Trade Agreement.

Trump praised the new United States-Mexico-Canada Agreement as an “historic transaction” on Monday but also said it is “too early to talk” with China about the escalating trade dispute between the two countries.

“Can’t talk now because they’re not ready,” Trump said of China. “Because they have been ripping us for so many years, it doesn’t happen that quickly.”

He added, “If politically, people force it too quickly, you’re not going to make the right deal for our workers and for our country.”

Reports of the last-minute cancellation of U.S. Defense Secretary Jim Mattis’ trip to China have added to the concerns about rising tensions.

The mixed close on Wall Street also came after Federal Reserve Chairman Jerome Powell delivered remarks at the annual meeting of the National Association for Business Economics in Boston.

Powell acknowledged concerns about the outlook for inflation due to the low unemployment rate but said the Fed stands ready to “act with authority” if inflation expectations drift materially up or down.

“This historically rare pairing of steady, low inflation and very low unemployment is testament to the fact that we remain in extraordinary times,” Powell said.

He added, “Our ongoing policy of gradual interest rate normalization reflects our efforts to balance the inevitable risks that come with extraordinary times, so as to extend the current expansion, while maintaining maximum employment and low and stable inflation.”

Sector News

Gold stocks showed a substantial move to the upside on the day, resulting in a 3.6 percent jump by the NYSE Arca Gold Bugs Index. The index ended the session at its best closing level in a month.

The rally by gold stocks came amid a sharp increase by the price of the precious metal, with gold for December delivery spiking $15.30 to $1,207 an ounce.

Considerable strength also emerged among tobacco stocks, which rebounded strongly after trending lower in recent sessions. After closing lower for seven straight sessions, the NYSE Arca Tobacco Index surged up by 2.7 percent.

The rebound by tobacco stocks came after the FDA revealed it seized “thousands of pages of documents” in a surprise inspection of e-cigarette maker Juul’s headquarters last week.

Utilities and telecom stocks also moved notably higher on the day, while retail and transportation stocks showed significant moves to the downside.

The major European markets also moved to the downside on the day. While the French CAC 40 Index dropped by 0.7 percent, the German DAX Index and the U.K.’s FTSE 100 Index fell by 0.4 percent and 0.3 percent, respectively.

In the bond market, treasuries rebounded following the downward move seen in the previous session. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, dipped by 2.4 basis points at 3.056 percent.

Looking Ahead

Reports on private sector employment and service sector activity may attract attention on Wednesday along with remarks by several Fed officials.